This book provides a systematic treatment of the interaction between national price levels and exchange rates, and the formation of expectation regarding exchange rates on trade flows. The thrust is empirical and the study is made up of five self-contained chapters with a common theme, viz., the behaviour of prices and quantities in international goods and financial markets. The major motivation is to distill the key issues addressed in the extremely large literature and present these issues in a succinct analytical manner.

• Title 4
• Copyright 5
• Contents 8
  • Figures 10
  • Tables 12
  • Preface 16
  • Acknowledgements 19
  • 1. Introduction 20
  • 2. A new methodology for purchasing power parity 52
  • 3. Purchasing power parity and relative price variability 99
  • 4. Real exchange rates and world trade 142
  • 5. Exchange rate forecasts 199
  • Index 218